HSBC 2001 Annual Report Download - page 149

147
and the Far East, other than any within 1 above,
weighted by market capitalisation; and
3. the banking sector of the Morgan Stanley
Capital International World Index, excluding
any within 1 and 2 above, weighted by market
capitalisation.
By combining the above three elements and
weighting the average so that 50 per cent is applied
to 1, 25 per cent is applied to 2 and 25 per cent is
applied to 3, an appropriate market comparator
benchmark is determined.
The extent to which awards will vest will be
determined by reference to HSBC Holdings TSR
measured against the benchmark TSR. The
calculation of the share price component within
HSBC Holdings TSR will be the average market
price over the 20 trading days commencing on the
day when the annual results are announced, which in
2002 is 4 March. The starting point will be,
therefore, the average over the period 4 March to 2
April inclusive. TSR for the benchmark constituents
will be based on their published share prices for 2
April 2002.
If HSBC Holdings TSR over the performance
period exceeds the benchmark TSR, awards with a
value at the date of grant of up to 100 per cent of an
employees earnings or less will vest. For higher
value awards, the greater of 50 per cent of the award
or the number of shares, the value of which at the
date of grant equates to 100 per cent of the
employees earnings, will vest at this level of
performance. If HSBC Holdings TSR over the
performance period places it within the upper
quartile in the ranked list, these higher value awards
will vest in full after five years. For performance
between the median and the upper quartile, vesting
will be on a straight line basis. The level of awards
will continue to be determined by the Remuneration
Committee.
The initial performance period will be three
years. If the upper quartile performance target is
achieved at the third anniversary of the date of grant,
but not if it is achieved later, an additional award
equal to 20 per cent of the initial performance share
award will be made and will vest at the same time as
the original award to which it relates. However,
regardless of whether the upper quartile target is
achieved on the third, fourth or fifth anniversary, full
vesting and transfer of the shares will not generally
occur until the fifth anniversary.
As a secondary condition, options and awards
will only vest if the Remuneration Committee is
satisfied that HSBC Holdings financial performance
has shown a sustained improvement in the period
since the date of grant.
Awards will vest immediately in cases of death
or if the business is no longer part of HSBC
Holdings. The Remuneration Committee retains
discretion to recommend early release of the shares
to the Trustee in the event of redundancy, retirement
on grounds of injury or ill health or retirement at age
50 or over. Awards will normally be forfeited if the
participant is dismissed or resigns from HSBC.
Where events occur which cause the
Remuneration Committee to consider that the
performance condition has become unfair or
impractical, the right is reserved to the
Remuneration Committee to make such adjustments
as in its absolute discretion it deems appropriate to
make.
It will be determined in March 2002 whether
the initial performance target for the Performance
Shares awarded in 1999 has been met. The following
chart shows HSBCs performance against the
benchmark TSR to 31 December 2001.